Fiscal Policy, Profits and Investment

Alberto F Alesina, Silvia Ardagna, Roberto Perotti () and Fabio Schiantarelli ()

No 2250, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper evaluates the effects of fiscal policy on investment using a panel of OECD countries. In particular, we investigate how different types of fiscal policy affect profits and, as a result, investment. We find a sizeable negative effect of public spending - and in particular of its public wage component - on business investment. This result is consistent with models in which government employment creates wage pressure for the private sector. Various types of taxes also have negative effects on profits, but, interestingly, the effects of government spending on investment are larger than the effect of taxes. Our results have important implications for the so called ``non-Keynesian'' (i.e. expansionary) effects of fiscal adjustments.

Keywords: Fiscal Policy; Investment; Profits; Taxes (search for similar items in EconPapers)
JEL-codes: E62 H32 (search for similar items in EconPapers)
Date: 1999-10
View list of references View citations in EconPapers

Downloads: (external link)
http://www.cepr.org/pubs/dps/DP2250.asp (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Fiscal Policy, Profits, and Investment (2000)
Working Paper: Fiscal Policy, Profits, and Investment (1999)
Journal Article: Fiscal Policy, Profits, and Investment (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:2250

Ordering information: This working paper can be ordered from
http://www.cepr.org/pubs/dps/DP2250.asp

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers
Address: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Series data maintained by ().